New Delhi, Aug. 24 -- For employees at startups and other companies offering employee stock options, an ESOP grant can become a meaningful part of their wealth. But a Rs.1 crore value attached to those shares does not necessarily translate into Rs.1 crore in the employee's bank account when they eventually cash out.

The amount an employee actually takes home depends on what they paid to exercise the options, the fair market value (FMV) of the shares when they exercised them, how long they held the shares and whether the shares were listed or unlisted.

"Four variables decide the outcome, and the Rs.1 crore headline is not one of them," said Parag Jain, tax head at 1 Finance.

In Jain's illustration, an employee whose ESOPs are eventually...